Japan’s telecom and internet conglomerate SoftBank is reportedly in talks with India’s largest wallet company Paytm to invest $1 billion to $1.5 billion. This comes right after reports surfaced that it will make a large investment in Flipkart, the country’s largest e-commerce company, during the Flipkart-Snapdeal merger.
For global investors this might not be a surprise considering India is the only silver lining in internet growth. The country grew by almost 30% to nearly 400 million internet users, making it the fastest growing market. Throw in rise of data usage -- it has tripled since Reliance Jio launched it services in September.
For SoftBank, whose business hinges on internet users, India becomes one of the most lucrative places to have significant presence.
In December, when Masayoshi Son, SoftBank’s founder and CEO came to India, he said, “India has the best opportunity ahead of us. That is why I come here today.”
SoftBank has already invested $2 billion, and will invest another $8 billion in the next eight years. He had done similar investments, including one in Alibaba, at the turn of the century. “Fifteen years ago we made lots of investment in China. Five years before that I made investments in Japan. Ten years before that in the US. All of them were in internet related companies,” Son had said.
Two years ago, it seemed like a battle between China’s Alibaba and Japan’s SoftBank. However, recent reports show that they want to co-exist. According to some sources, SoftBank is making space for Alibaba in the Snapdeal-Flipkart merger -- indicating a three-way merger between Paytm Mall, Flipkart and Snapdeal.
SoftBank has investments in Snapdeal, while Alibaba has in Snapdeal and Paytm. Also, Son and Alibaba’s founder share a long relationship. In January 2000, SoftBank led a round of $20 million of investment in Alibaba.
If the deal with Paytm materialises, SoftBank will be one of the three largest investors in the company. That will give Paytm a strong position in India’s largest digital-only bank in making.
Son is not looking at what will happen immediately. “I am better in forecasting, predicting, talking about 30 years later, than three years…,” he told HT in December. He was talking at the HT Leadership Summit about the future of chipsets, internet and artificial intelligence.
Once SoftBank has a foot in Flipkart and Paytm, it can make the two worlds come together -- one is of digital commerce (Paytm’s forte) like travel, entertainment, recharges, utility bill payments and a million of merchants who are getting ready to accept money through an app. The other world is where Flipkart is a leader -- of product e-commerce.
SoftBank can bring together the best of both these worlds. It can also use its expertise in artificial intelligence and virtual reality to make banking and shopping experience better.
With all of that at SoftBank’s disposal, it can make either Flipkart or Paytm a bigger phenomenon than WeChat in China, which is not only one of the largest e-commerce platforms for digital services, but also makes more digital ad revenue than any other existing platform in China.
Also, with the Flipkart-Snapdeal merger, SoftBank will have a significant stake in the country’s largest e-commerce firm, which will be much bigger than Amazon India.